Opalesque Industry Update – July is typically a heavy month for inflows and outflows as investors look to rebalance their portfolios mid-year. “This June’s GlobeOp Forward Redemption Indicator shows that July redemptions are the lowest they’ve been in the past four years,” said Hans Hufschmid, in a statement released by GlobeOp, the hedge fund service provider. |
The GlobeOp Forward Redemption Indicator is published by the firm midway through each month. It is built using the sum of redemption notices received by investors into the hedge funds that GlobeOp provides fund administration services to. The firm notes that “forward redemptions as a percentage of GlobeOp assets under administration have trended significantly lower since reaching a high of 19.27% in November 2008.”
While investors are more confident than they have been since the beginning of the global financial crisis, the cracks in that confidence may finally be showing, as hedge funds struggle to notch serious gains this year. While the GlobeOp Indicator may be down from previous July redemptions, it does reveal that expectations for redemptions at month end have risen slightly from May (up to 4.01% from 3.92%).
While mid-year rebalancing does tend to cause more volatility in asset flows, hedge funds have been steadily increasing assets, a trend managers would be loathe to see reversed. Redemptions notices do not necessarily mean investors will follow through on withdrawing funds, but with indications of lackluster June hedge fund performance July could be an inflection point for continued industry asset growth.